Plain Packs Court Battle

In April 2011 The Australian[1] reported that Philip Morris Limited (PML) and British American Tobacco Australia (BATA) were using Freedom of Information laws to obtain tens of thousands of documents - avoiding the more expensive legal discovery process - in preparation for the court challenge to plain packaging for cigarette packets.

The news article also reported that Slater & Gordon lawyer James Higgins had said that the information-gathering exercise of PML and BATA was ironic, given the tobacco companies destroyed their own internal documents to avoid liability for the effects of their products. He said the companies would stop at nothing to prevent plain packaging in Australia, fearing an international precedent that would affect global profits, adding that "They will use every tactic that is available to them." [1]

Philip Morris

Hours after the Australian Parliament passed the world's first plain packaging legislation on 21 November 2011, a Philip Morris Asia (PMA) press release announced that PMA had started formal legal proceedings under the Arbitration Rules of the United Nations Commission on International Trade Law 2010, claiming the legislation did not comply with The Australia – Hong Kong Bilateral Investment Treaty.[2] This ad-hoc tribunal meets "behind closed doors" and documentation is usually "kept out of the public domain". [3]

This is also contentious as PMA bought a large number of shares in Philip Morris Limited (Australia) after the Australian government announced that they would be considering plain packaging. Andrew Mitchell (international law expert) highlighted that the timing of Philip Morris Asia’s acquisition of shares in Philip Morris Australia on 23 February 2011, a whole 14 months after the Government announced its intention to introduce plain packs, is a concern. It suggests the acquisition was a strategic move in order to make this argument.[4] “It will be very difficult to argue that at the time of making that investment they had a legitimate expectation that plain packaging wasn’t going to be introduced when the Government had already announced it was going to do exactly that,” he said.[4]

In addition to a legal claim in relation to the Bilateral Investment Treaty, on 20 December it was announced that PMA's Australian affiliate, Philip Morris Limited (PML), would challenge the legislation in Australia's High Court.[5]

British American Tobacco

BATA also challenged Australia's plain packaging legislation in the High Court. On 1 December 2011, the day the legislation was given Royal Assent, The Herald Sun reported that BATA had started legal proceedings claiming the legislation was "unconstitutional and invalid due to the fact the Federal Government is trying to acquire our valuable intellectual property without compensation."[6] A BAT media release[7] stated that the legal proceedings will operate as a "test case" on the validity of the legislation relation to various property rights of the Winfield and Dunhill brands, claiming that:

"As a legal company selling a legal product we have consistently said we will defend our valuable intellectual property on behalf of our shareholders".

"The tobacco black market will be flooded with counterfeit cigarettes as they’ll be easier to copy and smuggle into the country once all packs look the same, and taxpayers will miss out on billions in tobacco excise while organised crime gangs make millions".

"Legal cigarette prices will also be reduced as the industry is forced to compete on price rather than brands, also increasing smoking rates even further".

Imperial Tobacco

Imperial Tobacco launched legal action on 6 December 2011, filing an application to the High Court of Australia to challenge the legality of the legislation.[8] "Unchallenged, the Australian government would otherwise be able to simply take the intellectual property of legal entities," claimed Imperial Tobacco Australia General Manager Melvin Ruigrok.

Later in 2012, prior to the impending plain packaging legislation due to come into force on 1 Dec, Imperial pre-empted plain packaging using its Peter Stuyvesant brand. Imperial Tobacco had set out their intention to test the validity of the laws using this brand in 2011.[9]

Japan Tobacco International

On 14 December 2011, Japan Tobacco International (JTI) announced it too was starting legal action in the High Court. "This legislation will stop JTI from using its brands, which are its most valuable property, and is unconstitutional. For this reason, we have commenced a legal challenge to this legislation in Australia's highest court," said Stefan Fitz, JTI's Regional President for Asia Pacific. The company also claimed that there "is no reliable evidence that demonstrates the effectiveness of such legislation".[10]

High Court Ruling

The key issue before the court was whether, under the constitution, plain packaging represented an "acquisition of property" by the government, from which they could benefit.[11]
On the 15 August 2012, the High Court in Australia ruled that plain packaging law was constitutionally valid.[12]
The reasons for the High Court’s decision were not published alongside the ruling and were expected at a later date. According to The Sydney Morning Herald, president of the Australian Council on Smoking and Health, Mike Daube, said that the ruling was “a massive win for public health” and that “It is also the global tobacco industry’s worst defeat” to date.[12]

PML spokesperson Chris Argent said “we will have to wait to read the court’s opinion to fully assess today’s decision. Regardless, the legality of plain packaging, including whether Australia will have to pay substantial compensation to Philip Morris Asia remains an issue and will be considered in other legal challenges.”

BATA (Australia’s cigarette market share leader) released a statement titled “Serious unintended consequences start 1 December” (see Image). Their spokesperson Scott McIntyre said the legislation was a bad piece of law that would have serious unintended consequences. “We still believe that the government had no right to remove a legal company’s intellectual property but British American Tobacco Australia will comply with this and every other law.”[13]

BATA’s statement reiterated its position on plain packaging, claiming that there is no evidence that it will work to reduce uptake and smoking prevalence. It also argued that as a result of increases in counterfeit and price wars between tobacco companies, youth smoking would inadvertently increase due to the increased availability of cheap cigarettes. BATA also claimed that the government will lose tax revenues “while crime bosses bank big profits” from the increase in counterfeiting and smuggling.[13]

Imperial Tobacco, which has a smaller market share in Australia than PML and BAT, released a statement reiterating earlier arguments that plain packaging will only benefit criminals and will have detrimental impacts on the revenue of retailers and government. Their statement also said that they “will continue to defend our legitimate right to utilise our trademarks to differentiate our brands from those of our competitors”.[14]

In the UK, industry front group Forest claimed that the ruling in Australia will not affect its campaign against plain packaging . The Director of Forest, Simon Clark encouraged the UK government not to follow Australia’s lead and to listen instead to the 235, 000 signatures of the Hands Off Our Packs campaign.[15] However, as a result of a FOI request the Department of Health in the UK made a number of its documents public which question the integrity of the Hands Off Our Packs campaign.

For more information on the evidence countering industry arguments against plain packaging, see:

International legal challenges

On the day of the High Court ruling on 15 August 2012, PML stated that this ruling had no bearing on other cases being brought against the Australian government with regard to plain packaging laws. PML sued the government for breach of the WTO member obligations and of the Bilateral Treaty (BIT) with Hong Kong. Decisions on these challenges are reportedly expected in the next 2-3 years. Argent commented on this, saying “We believe that Philip Morris Asia’s investment treaty case and the WTO challenges are strong. As such there is still a long way to go before all the legal questions about plain packaging are fully explored and answered."[11]

In September 2012, the Ukraine’s second request to establish a panel was successful. On the WTO website it states that the Ukraine disputes panel with Australia is "established, but not yet composed".

Industry Support of Country Challenges

All three of these countries who filed dispute cases with the WTO have received financial support from multinational tobacco companies to assist them in these efforts.[16]Philip Morris International covered some of the legal costs associated with the Dominican Republic’s case. Likewise, British American Tobacco provided financial resources to Ukraine and Honduras. Additionally, Cuba’s claim, which also challenged the WTO on the same grounds, was partially funded by Philip Morris.

Counter Evidence

Visit the following pages to learn how the industry developed the intellectual property argument as a defence to plain packaging in the early 1990s.